Fundamental of financial Management

As to how existing accounting and financial reporting standards reflect the different needs of stakeholders, GASB said, “The needs of the users of governmental financial reports are reflected in differences in the components of the conceptual framework for accounting standards and in individual accounting standards.

Although investors and creditors are important constituencies of every standards-setting organization, the Governmental Accounting Standards Board’s (GASB) conceptual framework also places priority on addressing the informational needs of citizens and elected representatives, two constituencies not identified as users of business enterprise financial statements by the Financial Accounting Standards Board (FASB).

Consequently, the GASB’s financial reporting objectives consider public accountability to be the cornerstone on which all other financial reporting objectives should be built. ” Reporting standards are reducible to accounting principles and applications hence the difference in standards must have to be reflected accordingly.

GASB readily agreed when it said, “Some of the most significant GASB standards that address differences in governmental and business financial reporting include (1) the measurement and recognition of certain types of revenues (for example, taxes and grants), (2) the view that capital assets provide services to citizens rather than contribute to future cash flows, (3) the use of fund accounting and budgetary reporting to meet public accountability needs, (4) the use of accountability principles rather than equity control to define the financial reporting entity, and (5) the treatment of pensions and other post employment benefits to allocate cost of services equitably to applicable periods. These and other accounting and reporting differences are described more fully beginning on page 11 and in Appendix B. ” Standards are not meant to be fixed. They must change with the times.

The is a an ongoing need to set additional governmental accounting standards as GASB said, “Since its inception in 1984, the GASB has strived to meet the needs of the users of governmental financial reports by issuing a number of important standards. Although the GASB has made progress, the need to develop and improve accounting standards for governments still exists. ”  The private sector too needs to update standards as a result of changes in the business environment. Harrington said, in discussing ‘The Accounting Profession: Looking Ahead’ said, “After a challenging period, the profession has demonstrated it maintains tremendous respect from the public it serves.

A study earlier this year by the independent research firm of Penn, Schoen & Berland Associates found, among other favorable results, that CPAs received very high favorability ratings among key constituents: business decision makers, executives and investors. ” To conclude, it must be made clear that governments differs from business enterprises in many respects that demands separate reporting and hence separate standards. Such separate accounting and financial reporting standards for governments and business enterprises are meant to address specific needs of the users of financial reports from governments including Congress and other branches of government.

The standards for each type show the unique environment of each including their purposes and orientations and accountabilities.

Work Cited:

Brigham and Houston, 2000, , Thomson South-Western, USA Accountancy, Online issues, 2005{www document} URL http://www. aicpa. org/PUBS/JOFA/oct2005/harring. htm, Accessed December 8, 2006. GASB, GASB White Paper: Why Governmental Accounting and Financial Reporting Is—and Should Be—Different, {www document} URL http://www. gasb. org/white_paper_executive_summary. pdf, n. d. , Accessed December 8, 2006. Government Accounting Standards Board, GASM Mission, {www document} URL http://72. 3. 167. 244/ , {www document} URL Harrington, C. , The Accounting Profession: Looking Ahead